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Apple may be golden because of the iPhone, but the soon-to-be-updated device is also increasingly the source of forbidden fruit. Steve Jobs' company is keeping a civil, if embarrassed, silence on one of the potentially most lucrative and controversial uses of its handheld jewel: porn.

The technological feats of the 3G iPhone are key to the coming pornucopia. To date, mobile porn has consisted largely of still images, racy text services and "moan tones," which are sultry-sounding ringtones. In Europe there is an active market for video chatting; customers pay on average $50 a month to exchange dirty messages with actresses. But now, thanks in large part to the iPhone's video dexterity, short clips are becoming a staple of the mobile porn business. The speed promised by the iPhone 2.0 is much anticipated. Google Trends, which measures Web buzz, shows a sharp increase over the past year in the popularity of the term "iPhone porn." (See the top iPhone applications.)

Leading porn purveyors see the iPhone as a dream come true. Its relatively ample screen size, speedy Web access and ease of use are just part of it. The device's miniaturized version of Apple's Safari software simplifies mobile access and streamlines the process of tailoring dirty sites for optimal viewing on the go. "It's by far the porn-friendliest phone," says Devan Cypher, representative for San Franciscobased Sin City Entertainment. As evidence of the gadget's rocketing popularity in California's porn capital, the San Fernando Valley, numerous iPhone-specific porn sites have been launched in recent months. "There are a few hundred iPhone porn sites now in use," says Farley Cahen, vice president of business development for AVN Media Network, the adult industry's trade body. Many others are currently in the works targeting the iPhone 2.0, which goes on sale July 11.

Apple spokeswoman Jennifer Bowcock says the company doesn't condone iPhone porn distribution and will ban adult content from official applications, just as it has restricted adult content in the podcast section of the Apple store. But it can't prevent customers from accessing porn through the device's browser. Indeed, the new iPhone may eventually propel mobile porn deeper into the sphere of interactivity. Blogger Jason Swifter has already imagined one such scenario. "I wish there was an application that allowed you to undress people by dragging your fingers across the screen and literally dragging it off," he wrote on iPhonematters.com. Apple says that more than 250,000 programming kits have been downloaded, enabling programmers to create their own iPhone applications, like games or chat services. Just as users have unlocked iPhones for use around the world, some may eventually figure out how to surreptitiously create and distribute iPhone porn applications. (See 25 must-have travel gadgets.)

Sensing the start of a profitable new era for pocket porn, the adult entertainment industry is investing heavily and feverishly broadening its marketplace of iPhone porn. The industry sees the iPhone 2.0 as having multiple advantages over the first model. For one thing, Apple's new gadget is nearly twice as fast as its predecessor at loading Web pages, and even faster at running video, which is crucial for the porn industry. About a third of iPhone users watch video on their phone, according to Nielsen Mobile, which is nearly 10 times the number that watch video on other cell phones. Three out of four iPhone users are men with above-average incomes, and iPhone users spend heavily on entertainment. More than a third of iPhone users shell out more than $100 on phone and data charges every month, as compared with just one-fifth of other cell-phone users.

Furthermore, the new model will be available in at least 75 countries, enabling content providers to reach new mobile porn viewers all around the world. Mark Kirstein, president of Multimedia Intelligence, a mobile-research firm, says the iPhone is like a Trojan horse that lets smut providers cut out the carrier as middleman. "The iPhone becomes a portal where people can get to content directly without worrying about the social mores of the network operator," he says, referring to carriers like Canada's Telus, which canceled an experimental adult-content offer after receiving hundreds of customer complaints. That means better margins for direct porn providers amid this potential wave of new profits.

In 2007, the international market for mobile adult content reached $1.7 billion, according to Juniper; 45% of that revenue came from Western Europe, where mobile porn is more widely offered by carriers. "There's less of a drive to regulate the industry in Europe," says mobile-industry consultant Chetan Sharma, who adds that U.S. and Canadian carriers have largely avoided carrying porn applications for fear of a public backlash. Before the new iPhone was announced, Juniper projected that revenue from mobile adult content would rise to $4.6 billion by 2012. With millions of 3G iPhones in the market, Juniper's principal analyst Windsor Holden says, the number could grow far larger. "A huge portion of the $13 billion adult market has been reliant on physical distribution," says AVN Media Network's Cahen. "That business model is shifting to downloadable and streaming content."

Opposition to iPhone porn, however, may grow as well. The genre's availability could spark new demand for mobile-phone porn blockers, as parents realize that children could access adult content on Apple's device. "Our iPhone 2.0 software will give customers the opportunity to turn on parental controls," says Apple spokeswoman Bowcock. Some parents may not be tech-savvy enough to figure that out, though, and some kids may be clever enough to find a work-around. "If a minor with one of these phones pokes around, he could easily access adult sites without his parents' knowledge," says Holden, who authored "Adult Content in the Palm of Your Hand," Juniper's latest research report.

Cahen says an industry group called the Association of Sites Advocating Child Protection has worked to promote industry-wide adherence to standards preventing youth access to porn. Problems may still arise, says Holden. "If the Janet Jackson episode led to a fine for a quick breast flash," he says, "can you imagine what could happen to an American carrier if a child gets hold of some of the hard-core materials that are easily available? The FCC will have a field day."